The Council of Mortgage Lenders has criticised moves to make Support for Mortgage Interest (SMI) payable direct to borrowers in financial trouble, rather than to the lenders.
The CML says it would ‘inevitably’ mean that the money was being diverted for other uses.
The CML spoke out while giving a guarded welcome to the consultation published by the Department for Work and Pensions on Support for Mortgage Interest (SMI).
The CML said it welcomed the confirmation that “the Government is committed to continue providing support for mortgage interest, to assist those owner occupiers who qualify for this help to remain in their homes and avoid repossession as far as possible”.
It said it supported the idea of an option to receive SMI for the long term in return for a charge on the property through which the State could recoup some of the costs at a later date. The body said it was right that taxpayers should not effectively help people to acquire personal assets through any long-term rises in house prices.
However, the CML hit out at the proposal to move away from the Mortgage Interest Direct scheme, under which the claimant’s SMI is paid to their mortgage lender.
The Government is proposing to pay the benefit instead to the claimant, under the new universal credit system, so that claimants take responsibility for making their mortgage payments to their lenders.
But the CML says any move away from Mortgage Interest Direct would inevitably mean that some of the funds designed to help meet mortgage costs would be diverted to other spending by some claimants.
The CML has expressed the same concern over the payment of housing benefit to tenants, rather than directly to landlords. Many landlords are said to have left the housing benefit sector as a result, complaining of arrears.
CML director general Paul Smee said: "It is good that the Government is in listening mode about Support for Mortgage Interest, as there is much that can be done to improve it.
“However, the principle of paying the benefit to claimants rather than lenders is dangerous in terms of potentially reducing its effectiveness in meeting its intended purpose.”
The CML will make a formal response to the consultation which also suggests that householders eligible for SMI could only receive the support for a set period of time, rather than for as long as they are eligible.
Welfare reform minister Lord Freud said: Lord Freud said: “The current system of SMI payments does not encourage people to get on top of their own finances. It is also not sustainable. Even with today’s low interest rates it costs government £400 million a year.
“We are committed to supporting homeowners to stay in their own homes when times are hard. But in the future this type of support must be fair and affordable so we are seeking views from experts and the wider public, including options for putting a charge on the homes of future claimants so when they sell up we can recoup some of the costs.”
News Source: http://www.introducertoday.co.uk/
The CML says it would ‘inevitably’ mean that the money was being diverted for other uses.
The CML spoke out while giving a guarded welcome to the consultation published by the Department for Work and Pensions on Support for Mortgage Interest (SMI).
The CML said it welcomed the confirmation that “the Government is committed to continue providing support for mortgage interest, to assist those owner occupiers who qualify for this help to remain in their homes and avoid repossession as far as possible”.
It said it supported the idea of an option to receive SMI for the long term in return for a charge on the property through which the State could recoup some of the costs at a later date. The body said it was right that taxpayers should not effectively help people to acquire personal assets through any long-term rises in house prices.
However, the CML hit out at the proposal to move away from the Mortgage Interest Direct scheme, under which the claimant’s SMI is paid to their mortgage lender.
The Government is proposing to pay the benefit instead to the claimant, under the new universal credit system, so that claimants take responsibility for making their mortgage payments to their lenders.
But the CML says any move away from Mortgage Interest Direct would inevitably mean that some of the funds designed to help meet mortgage costs would be diverted to other spending by some claimants.
The CML has expressed the same concern over the payment of housing benefit to tenants, rather than directly to landlords. Many landlords are said to have left the housing benefit sector as a result, complaining of arrears.
CML director general Paul Smee said: "It is good that the Government is in listening mode about Support for Mortgage Interest, as there is much that can be done to improve it.
“However, the principle of paying the benefit to claimants rather than lenders is dangerous in terms of potentially reducing its effectiveness in meeting its intended purpose.”
The CML will make a formal response to the consultation which also suggests that householders eligible for SMI could only receive the support for a set period of time, rather than for as long as they are eligible.
Welfare reform minister Lord Freud said: Lord Freud said: “The current system of SMI payments does not encourage people to get on top of their own finances. It is also not sustainable. Even with today’s low interest rates it costs government £400 million a year.
“We are committed to supporting homeowners to stay in their own homes when times are hard. But in the future this type of support must be fair and affordable so we are seeking views from experts and the wider public, including options for putting a charge on the homes of future claimants so when they sell up we can recoup some of the costs.”
News Source: http://www.introducertoday.co.uk/
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